By Rhod Mackenzie
An increase in petrol prices is curently happening in many countries around the world. For example, in New York, petrol futures have now risen to a 9-month high. While oil futures have remained almost unchanged as of the end of July, oil futures rose by 20%. A similar pattern is observed in Asia and Europe.
Analysts explain the "petrol wave" on a global scale by a combination of several circumstances. Most of all, explains Bloomberg, unexpected and various problems at many oil refineries , including quite large ones, are to blame; plus low fuel supplies at major petrol hubs such as the US Gulf Coast and Singapore. Of course, one should not forget about the anomalous heat wave that engulfed significant regions in the northern hemisphere in July.
Another wave of rising petrol prices is a headache for Central Banks, including, of course, the Fed. Bankers now have to decide how much longer to raise rates to curb inflation. Petrol prices have attracted global attention, not only because motorists have to deal with them every day at filling stations. The fact is that due to their "universality" they directly affect the prices of a great variety of goods and services. Together with energy prices, they also accelerate inflation.
Rising petrol prices are a separate headache for the White House. Despite the fact that there is still more than a year before the presidential election, Joe Biden has to keep a close eye on filling station prices all the time, because in the United States this is one of the important factors affecting the results of absolutely all elections, including presidential and congressional elections. Meanwhile, given that the Strategic Petroleum Reserve is now only half full of oil, thanks in large part to last year's midterm congressional elections, it is becoming increasingly difficult for the White House to withdraw oil from them to ultimately lower petrol prices.
The universality of petrol prices is illustrated by the following statistics: a 1-cent increase in the price of a gallon (3.78 liters) of automotive fuel, according to the calculations of Deutsche Bank Senior Economist Brett Ryan, reduces annual purchasing power by $1.15 billion. This means, for example, that a $1.3 reduction in US gasoline prices on average in the second quarter saved Americans about $150 billion. Not surprisingly, the price tags at American filling stations are so closely watched not only by car owners, but by the rest of the American population, including politicians.
Petrol prices are rising due to low inventories and strong demand. The reasons for low stocks are different. In Singapore, Asia's main petrol hub, for example, they are largely attributable to lower-than-expected petrol exports from China this year. Petrol supplies are clearly in no hurry to recover from historical lows despite the growth in refining capacity in the Middle East and China. Here the reason is also known - a whole wave of unexpected closures for various reasons of refineries in different countries. For example, the large Exxon Mobil refineries in Baton Rouge, Louisiana are currently closed; Shell in Rotterdam and ENEOS Holdings in Mizushima, Japan. As a result, deliveries were significantly reduced with relatively low levels of fuel in storage already.
In China, the largest importer of oil, for example, there is now a high demand for petrol for a number of reasons. The traffic congestion in the 15 cities with the highest number of cars is now approximately 25% higher than in January 2021, according to Baidu Inc. With such high demand, however, the filling of petrol storage facilities is now the lowest in four years.
Demand for petrol is growing, of course, in Europe as well. Significant growth was recorded in such countries as France, Germany, Spain, Italy, i.ะต. in the major economies of the continent. At the same time, Europe has not yet recovered from February 24, 2022 and has not fully compensated for the loss of cheap Russian energy sources, including oil, which was used by dozens of refineries across the continent.
In Europe, the technical side is also to blame for the shortage of petrol. The switch from Russian Urals oil to lighter American grades has led to a surge in light naphtha that can be added to petrol. This, however, requires a reformat. As a result of some complication of the technical process, the price of premium petrol has increased significantly.
Wood Mackenzie gives another reason for the decline in petrol supplies, which led to its shortage and rising prices. Due to the unseasonal increase in diesel prices, many refineries are now increasing their production at the expense of petrol.
This article originally appeared in Russian at expert.ru